Morningstar DBRS Downgrades Credit Ratings on Four Classes of JPMBB Commercial Mortgage Securities Trust 2015-C29

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on four classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C29 issued by JPMBB Commercial Mortgage Securities Trust 2015-C29 as follows:

-- Class C to BB (low) (sf) from A (low) (sf)
-- Class X-C to BB (sf) from A (sf)
-- Class EC to BB (low) (sf) from A (low) (sf)
-- Class D to C (sf) from CCC (sf)

Morningstar DBRS confirmed its credit ratings on the remaining classes as follows:

-- Class A-3A1 at AAA (sf)
-- Class A-3A2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class E at C (sf)
-- Class F at C (sf)

Morningstar DBRS changed the trends on Classes C, X-C, and EC to Stable from Negative. The remaining classes have Stable trends, with the exception of Classes D, E, and F, which have credit ratings that typically do not carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating downgrades largely reflect Morningstar DBRS' liquidated loss expectations for the pool, driven by the two specially serviced loans, which are also the two largest loans in the pool. Together, those loans comprise 22.5% of the remaining pool balance and were analyzed with liquidation scenarios based on significant haircuts to the issuance appraised value or an updated appraised value recently obtained by the special servicer, resulting in total projected losses of nearly $100 million. The transaction has realized losses of nearly $20.0 million as of the December 2024 remittance which have been contained to the unrated Class NR; however, Morningstar DBRS' liquidated losses are expected to erode through the remainder of that class, up through all of the Class F and E certificates, and through most of the Class D certificate, supporting the credit rating downgrade to C (sf) for that class. The Class NR and Classes D and E are also currently exposed to interest shortfalls, with cumulative outstanding interest shortfalls totaling $4.8 million as of the January 2025 remittance.

The credit rating downgrade for Class C reflects the erosion of credit support with the liquidation scenarios as outlined above. The credit rating confirmations elsewhere in the capital stack reflect Morningstar DBRS' recoverability expectations for the remaining loans in the pool, with those classes benefitting from the sizable defeasance concentration of nearly $136.0 million (26.3% of the pool), as well as significant paydown since issuance and remaining cushion of more than $50 million against liquidated losses in the liquidation scenario considered with this review. Based on the most recent credit metrics reported by the servicer, Morningstar DBRS identified just six performing loans that combine for 6.73% of the total pool balance that are exhibiting increased refinance risk. That analysis also showed 23 loans representing approximately 43.3% of the pool that are expected to repay at the scheduled 2025 maturity dates.

Except for two loans (Aspen Heights - Texas A&M University (Prospectus ID#11, 4.5% of the pool, maturing January 2026), and The Heights (Prospectus ID#24, 1.3% of the pool, maturing May 2030), the remaining loans in the pool are scheduled to mature by June 2025. The overall positive maturity outlook is based on the generally healthy performance of the underlying collateral, as exhibited by a weighted-average (WA) debt service coverage ratio of 1.51 times (x) and WA debt yield of 11.4% as of the YE2023 reporting. For those five loans exhibiting weak refinance metrics, stressed scenarios were considered as part of this review to increase the expected losses in the model.

As of the December 2024 remittance, 45 of the original 63 loans remain in the pool. The initial pool balance of $984.5 million has been reduced by 47.7%, to $514.9 million, which includes $19.2 million of losses from loan liquidations. In addition, 26.3% of the pool has defeased. As of the most recent reporting, 25 loans representing 46.0% of the pool balance are on the servicer's watchlist; the bulk of those loans are primarily being monitored for upcoming maturity dates.

The largest loan in special servicing, One City Centre (Prospectus ID#2, 11.6% of the pool), is secured by the borrower's fee-simple interest in a 602,122-square-foot (sf) office property in Houston's central business district and is part of a whole loan that was split pari passu between two CMBS transactions, both of which are rated by Morningstar DBRS. The loan transferred to special servicing after the former largest tenant, Waste Management (40.5% of net rentable area (NRA)), vacated at lease expiration in December 2020. As of the YE2023 servicer reporting, the occupancy rate was near 24.0%, where it has hovered since the loss of Waste Management. At issuance, the occupancy rate was 82.6%. Based on the June 2024 appraisal, the property was valued at $25.9 million, an 84.0% decline from the issuance appraised value of $162.0 million. Given the lack of progress in resolving the loan, failed attempts to sell the property, declining performance metrics, dismal leasing traction, and soft Houston office market fundamentals, Morningstar DBRS expects there will be low investor appetite for the asset, a factor that could push the sales price well below the appraiser's as-is value estimate. As such, a 25.0% haircut was applied to the June 2024 value, with a resulting loss severity of nearly 100% in the analysis for this review.

The other loan in special servicing, 2025 M Street (Prospectus ID#1, 10.8% of the pool), is secured by the borrower's fee interest in a 191,281-sf office property in the Washington D.C. central business district. The loan transferred to special servicing in July 2024 for imminent payment default; negotiations for a loan modification are ongoing with no formal workout strategy identified as of the most recent servicer reporting. Occupancy has been depressed since the departure of the former second-largest tenant, SmithBucklin Corp (37.3% of NRA), which vacated in June 2020. The occupancy rate was most recently reported at 58.8% as of March 2024 and cash flows have been below breakeven since 2021. As of the December 2024 reporting, there is $6.3 million held in reserves, which includes $2.5 million in the tenant reserve account and $3.5 million in other reserves, which typically include tax and insurance amounts. The loan remains current as of the December 2024 reporting, with the borrower continuing to fund operating shortfalls. No updated appraisal has been received, to date; however, to account for the property's long-term underperformance and the soft submarket for office assets in Washington D.C., Morningstar DBRS considered a steep haircut to the issuance appraised value of nearly 85%, with a resulting value of approximately $18.5 million and a resulting liquidated loss severity of 78.0%.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes X-A, X-B, and X-C are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444617.

Other methodologies referenced in this transaction are listed at the end of this press release.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

DBRS Limited
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Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology/North American CMBS Insight Model v 1.2.0.0 (December 13, 2024), https://dbrs.morningstar.com/research/444616
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.